During their Sept. 5 meeting, City Commissioners approved a series of fee increases related to land development.

In August, they decided to delay those hearings to give more time for the development community to review the proposals and discuss them with city staff.

City staff told commissioners last summer during the budget process that they needed to look at adjusting those fees and during the budget process this summer, commissioners asked staff to look at adjusting fees to recover their costs for services.

The land development fees haven’t changed since 2014, which City Manager Greg Doyon said during their Aug. 1 meeting has had a “significant” financial impact.

There was a time the city’s development review process wasn’t good, Doyon said, and there was a hesitancy to increase fees for cost recovery for fear of being perceived as not business friendly.

It’s becoming unfriendly to taxpayers not to do cost recovery, Doyon said.

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“The taxpayer is proving payment for services that are being rendered,” to the development community, Doyon said.

In some instances, that cost could be passed on to residents through utility rates, he said, without adjusting the development fees.

The city moved engineers from public works to the planning department for plan review, but that concept didn’t work as planned so they’re moving the engineers back to public works, he said.

Staff is trying to alleviate pressure on the general fund, which are the primary dollars funding the city’s public safety departments, and using those dollars to subsidize other functions takes away that capacity, Doyon said.

He said he understands the development community won’t like increased fees, but the review process and inspections are needed due to various regulations and to ensure the city is accepting good public infrastructure rather than paying to fix it later.

Chris Gaub, city public works director, said that staff is working to have inhouse engineering review and their hourly review rates are lower than the city’s third party consultant, but that they’ll retain the consultant in case of staff shortages or spikes in development applications.

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Brad Talcott, a local developer, said he understands and supports the increased fees.

Commissioners unanimously approved the increased engineering fees. No one spoke in opposition.

Commissioner Rick Tryon said that he liked the predictability of the new fees but said the city should find other ways to mitigate costs for developers.

He, and other commissioners, suggested that the city consider reviewing the landscaping requirements for new development.

In 2020, commissioners voted to reduce the city’s landscaping requirements.

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Tryon and Mayor Bob Kelly were on the commission at the time.

The changes includes a reduction in the number of required trees for single and two family residences. The code would still require that turf grass or ground cover plants cover at least 50 percent of the lot area not covered by a structures, but the change requires at least one interior tree in addition to the required boulevard trees. The previous code required one tree per 1,500 square foot of net lot area.

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The changes also codify design flexibility using low maintenance plants, sculptures and boulders into landscaping to give developers more options. Staff tested those ideas with some projects at the time, including West Bank Landing and built that into the code.

The changes allow developers to substitute two perennials or one ornamental grass for one shrub to up to 30 percent of the total required shrubs; nine cubic feet of sculpture integrated into the landscaping can substitute for one shrub up to 10 percent of the required shrubs; and each two foot boulder or larger can substitute for up to one shrub up to 10 percent of the total required shrubs.

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Gaub told commissioners in early August that staff sent notice of the fee increase proposal to the development community and scheduled an open house for Aug. 11. Staff added another open house for Aug. 15.

During those open houses, city commissioners, staff, developers, a local engineering consultant, representatives from NeighborWorks Great Falls and the Homebuilders Association of Great Falls, and an employee of North Central Independent Living, discussed the proposals.

Staff said feedback from the development community included concerns about the accuracy of the infrastructure fee formula adopted last year but not yet used in practice; permit review by the city’s third party engineer, particularly about comments that did not reference city code and hourly billing practices; the need to have access to higher level decision makers in the city manager’s office; the need to have a clearly understood appeal process for developers who disagree with engineering decisions; the fact that fees are being increased at a time where all construction costs are getting higher and it’s easier to construct projects in the county versus the city.

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City staff said they’d address the concern on accuracy of the infrastructure fee formula by working through one instance with a local engineering firm to test it.

Staff also said they’d assess the accuracy of the fee and adjust it if it ended up being too cheap or costly.

Staff said they’d also move to inhouse engineering review by Oct. 5 and will not likely use the third party consultant much going forward.

An appeal process already exists since designers can ask for design deviations, but Doyon directed public works staff to develop a clear appeals process.

In terms of fees increasing when development costs have risen, staff said the fees haven’t changed in years and they aren’t increased proportionally to project valuations.

Doyon told commissioners during their Aug. 1 meeting that the new budget included the proposed fee increases. Commissioners approved that budget during their July 18 meeting.

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The first change pertains to engineering reviews of building and parking lot permit applications.

The engineering division of the city’s public works department reviews those applications to ensure proposed improvements within the adjacent right-of-way and water/sewer/storm utility connections adhere to the city’s standards for design and construction and the city code.

The engineering division also reviews plans and design documents for privately owned and maintained stormwater systems, when required, for compliance with the city’s storm drainage design manual and city code.

The reviews require staff time, equipment and materials.

To recoup those costs, engineering staff collaborated with planning staff to develop a review fee proposal.

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The review fee was calculated based on the estimated time that it will take for an engineer to review the submitted data multiplied by the commission approved hourly rate, which is less than the rate currently being charged by Sanderson and Stewart, the city’s third party consultant.

The planning department will collect and administer these fees with a processing fee and a required 3 percent credit card convenience fee, according to staff. The proposal also allows pass through of the fees the city incurs when review assistance is provided by third party consulting engineers, according to staff.

The city transferred development plan review, construction oversight and project management duties from the public works engineering division to the planning department in 2019. As part of that transfer, a different funding strategy and budget was developed the finance the full time employee positions and related operational costs, according to staff.

Commissioners adopted that fee structure in September 2021, and subsequently adopted a modification allowing staff to directly pass along costs the city incurs from third party engineering consultants to the project applicant or developer.

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With engineering position vacancies in the planning department since that transition, staff has determined it’s best to move engineering development plan review, construction oversight and construction management duties back to the public works engineering division.

The planning department will continue to function as the intake and facilitator of development applications, according to the staff report.

The proposed fees are an “upfront, predictable fee structure” that will replace hourly billing for development review, according to the staff report.

The proposed new fee structure is due to a shortfall in the planning department budget, portions of which are funded by associated fees for services.

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Even if the commission approves the increased fees, the planning department budget still needs $376,932 from the genera fund, according to staff. During the budget process this summer, commissioners discussed the need to increase user fees to alleviate pressure on the general fund.

The planning budget is also losing revenue this year due to state law changes that prohibit local governments from requiring business licenses when such licenses are required by the state. Staff is working with the city legal department to determine which licenses can no longer be required, but are estimated a revenue loss of about $70,000.

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Staff is also proposing to increase land development application fees.

Those fees haven’t been increased since 2014, according to staff.

“It is always advisable for local governments that charge user fees to evaluate them almost every year for both fairness and cost recovery. To prepare the revised land development fee schedule, staff went through a lengthy analysis process focused on two areas: 1) the true cost of total staff time spent on representative land development proposals, and 2) comparisons with development fee schedules from other Montana municipalities,” according to staff.

In comparing Great Falls land development fees to other Montana communities, staff found that other cities have more recent fee structures and that Great Falls’ fees are “far less” than Missoula and Bozeman and generally lower than Billings.

“It was important for staff to focus on identifying the correct fee amounts rather than more comprehensively
adding new fees to the development process,” according to the staff report.

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“While it is always hard to perfectly track staff time spent on land development projects, staff also did an analysis of staff time spent on representative annexations, subdivisions, conditional use requests, rezoning projects, and more administrative processes. What staff discovered is that the current fees did not accurately match the number of hours spent on typical projects. This is another reason why fees are proposed to be increased,” according to the staff report.

To illustrate the analysis for commissioners, staff used the recent zoning and annexation request for the 432-unit apartment project that will eventually be constructed at the northeast corner of 38th Street and 2nd Avenue North.

Under the previous fee structure, the developers paid a flat $2,000 fee to annex and zone the property, according to staff.

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During the four months of staff time needed to get the project through the development process, and ultimately approved by the commission, staff conservatively estimated that six employees worked on the project for about 90 hours of staff time and that almost $9,000 worth of staff salaries were spent on the project review.

Staff proposed the new annexation fees be based on property size and if the new fees were in place for this project, the application fee would be $5,400.

The new fee wouldn’t cover total staff costs, but would be better cost recovery, according to staff.

The new fees would increase application revenue from $40,000 to $50,000 annually, based on the last two fiscal years, to about $110,000 to $140,000, according to staff, but the department would still need general fund support.

Brock Cherry, the new city planning director, said that when he took the job he didn’t know the first project would be increasing development fees.

He said it might seem backwards to increase fees when they want more development, but they want to be sure they aren’t overly subsidizing private development with taxpayer dollars.

Cherry said that “for growth to pay for growth, the proposed fees should be approved.”

Talcott also spoke in favor of increasing the planning fees.

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Katie Hanning, director of the Homebuilders Association of Great Falls, said they were opposed to the free increases.

She said the fees get passed down to the consumer and that there was a lack of collaboration between city staff and the development community.

Commissioner Joe McKenney said that when he worked in the casino industry and the state wanted to tighten the regulations and increase fees, they worked with those in the industry.

He said that he’s be voting against the proposal due to the process and that there could be better collaboration.

Mayor Bob Kelly said the actions were the culmination of at least a 10-year dialogue and that in some cases, staff dropped some proposed changes because the development community was so opposed.

Commissioners voted 4-1 with McKenney dissenting to the increased planning fees.

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Commissioners also voted unanimously to increase building division fees by 8 percent, due to budget shortfalls, many of the reasons detailed above, and several additional factors.

During the development review process changes, a staff planner was assigned to each project to oversee its progress through the full process. That required planners to be become more fluent in what all departments need in the review process and increase their involvement with the building division.

Because of that, the recently city adopted city budget allocates that each planner is paid 10 percent from the city’s building division fund, which is fee driven, creating a need to create more predictable revenue in that fund, according to staff.

The last fee increase was in 2014 and in 2018, the department decreased fees.

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With a similar volume of activity, staff estimates the fee increase will generate about $100,000 to $200,000 in additional revenue.

Talcott again said he understood the need to increase the fees and supported the move.

He said he was worried about other components of the development process and the effect those have on development, but it wasn’t clear specifically what he was referring to.

Doyon said that staff is at a disadvantage during these types of conversations since it’s often technically more complicated than what is being represented.

“There’s often more to it than we can get to in a commission meeting,” he said.

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Doyon said staff can address that going forward if it’s what the development community really wants by putting more things in writing, sharing emails on development with commissioners and talk more about standards.

He said the city has come a long way in improving the development process over the last five to eight years and are continuing to work on the process.

He said the city eliminated the design review board in response to the development community.

Doyon said he often hears that it’s easier to do business in Great Falls compared to many other large Montana communities.

He said that staff is aware of concerns but that there’s unlikely anything they could do that would satisfy everyone.

If commissioners have ideas on improvements to the process, Doyon said they can amend the code.

McKenney said “Great Falls has made tremendous strides,” and also hears about positive change, but that the city has to make every effort to be a business friendly community.